Lloyds Bank makes first UK digital promissory note purchase

Lloyds Bank has completed the UK's first transaction using a digital promissory note purchase.

Promissory notes are used to complete purchases in lieu of cash, allowing a purchaser to obtain goods or services based on their creditworthiness. While they have been around for thousands of years, in a modern setting their use is typically limited to large transactions that often involve the sale or purchase of property.

The bank says that the law these notes currently fall under has hindered innovation because it requires them to be a physical entity. The transfer of physical paper notes between banks and notaries means it can take a week or more for businesses to be paid.

Lloyds said that under legal guidance, it developed a digital promissory note and carried out a pilot transaction.

The transaction, which involved the sale and purchase of land worth £48 million between several UK businesses, was completed within a day.

The organisation says that the successful pilot dramatically increased the speed of payments and will lead to a significant increase in the use of promissory notes for a broad range of transactions.

“With this successful UK-first transaction, we have delivered an innovative digital solution that is quicker, less expensive, and more secure,” said Gwynne Master, managing director, lending and working capital for Lloyds Bank. “The digitisation and simplification of this solution finally opens this form of payment discounting to potentially millions of small businesses, improving their ability to manage their working capital and the cashflow of their suppliers by fulfilling invoices more quickly.”

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